A shale gas boom in the U.S. combined with political problems in South America is prompting Vancouver’s Methanex Corp. (TSX:MX) to spend $550 million on relocating an idled plant from Chile to Louisiana.
Methanex owns four methanol plants in Chile, but only one is now in operation, said Jason Chesko, Methanex’s director of investor relations.
For political reasons, the company can no longer get natural gas from Argentina, so it is relocating one of its idled plants to the southern U.S. state, where a shale gas boom means there will be no lack of base product to turn into methanol.
“With low-cost natural gas environment that’s come in the U.S., we found this to be a real opportunity to use one of these plants,” Chesko told Business in Vancouver.
Chesko said the company will fund the relocation with cash on hand.
“We’re in a strong financial position. We have over $600 million in cash on our balance sheet.”
The plant relocation, which Methanex will own and operate, will create 1,500 jobs during the construction phase and 130 full-time jobs for Geismar, Louisiana.
Chesko said the Louisiana plant will produce one million tonnes of methanol and roughly $200 million annually when it is up and running.
Although dismantling the plant and shipping it across the ocean and up the Mississippi to Geismer will be costly, it’s still cheaper than building a new plant from scratch, Chesko said.
Methanex owns five methanol production sites, including one in Medicine Hat, one in Egypt, two in New Zealand and two in Trinidad.
Methanol is used to make plastics and paints, building materials, polyester, and various health and pharmaceutical products. It is also used as a fuel additive
Methanex shares were down 2.74% to $28.41 per share at close of markets Thursday.
